How much of a punch did the Federal Reserve’s easy-money policies pack?

Quite a wallop, two economists say in a new paper published Friday by the International Monetary Fund.

The U.S. Federal Reserve building in Washington

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Former Fed Chairman Ben Bernankefamously quipped in his closing days that the problem with quantitative easing is that “it works in practice but it doesn’t work in theory.”

Not all central bankers and economists have agreed, spurring a debate over the effectiveness of the Fed’s policies. Part of the problem was that it was difficult to determine the impact of bond-buying on borrowing costs.

Some of the Fed’s own studies don’t find large gains from the central bank’s bond-buying programs. For example, San Francisco Fed researchers Vasco Curdia and Andrea Ferreroestimated the program that ran from late 2010 to early 2011 raised growth by just 0.13 percentage point. If accurate, all of the Fed’s bond programs together would have added less than a percentage point to economic output.

Others find more substantial effects. San Francisco Fed President John Williamsin January estimated that $600 billion of Fed bond purchases lowered the yield on 10-year Treasuries by about 0.15 percentage point to 0.25 percentage point. That’s similar to the movement that would follow the Fed cutting short-term rates by 0.75 percentage point to a full percentage point – a relatively large rate cut, he said at the time.

In the paper published Friday, the duo backs Mr. Williams’s assessment.

They estimate the total impact of the Fed’s bond buying from 2008-2012 cut real 10-year yields by 140 basis points, or 1.4 percentage points.

“We find that recent purchases of U.S. government debt securities by the Fed…have indeed affected the level and dynamic of U.S. real rates significantly,” they said.

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